Reality bites on climate change

LABOR and the Greens must co-operate on pricing carbon or risk oblivion.

THE message from the new parliament is that Julia Gillard's fate hinges on Labor's ability to achieve a carbon price this term, thereby converting climate change from a symbol of its failure to proof of its commitment.

The most important policy change from Gillard since the election is her resurrection of climate change as a priority. She has broken with impunity her campaign promise to reject a carbon tax. She has abandoned the timidity of reducing climate change to a mere citizens assembly debate.

With the election over, she has confronted Tony Abbott on the need to price carbon.

This is a reinvention of Gillard. Remember it was Gillard earlier this year who urged Kevin Rudd into his climate change retreat. Search Gillard's speeches and they are devoid of heroics or moralism about climate change.

But that was yesterday.

Post-election, Gillard has made the tactical and strategic judgment that Labor must conquer the malaise that nearly killed the previous government: its inability to price carbon.

This is a frontal challenge to Abbott. His response, in turn, has been typically aggressive: the Coalition will fight carbon pricing, it will resist Labor at every stage, it will brand this project as a sell-out to the Greens and, if Gillard does choose any variation of a carbon tax, Abbott will go to next election accusing Labor of a breach of its 2010 election pledge.

There is only one way the Coalition will reverse on carbon pricing: under a new leader. And Abbott is going nowhere.

The renewed political war on climate change began with the first question in the new parliament, Abbott quizzing Gillard on the consequences for households of pricing carbon and why she broke her carbon tax promise.

Abbott's hostility means Gillard's tactic is the opposite of Rudd's. Last year Rudd relied on the Malcolm Turnbull-led Coalition to legislate his carbon price and failed, while Gillard has little choice at present but to rely on the Greens. Where Rudd ignored the Greens, Gillard has brought them into the heart of government,

a step dictated by the hung parliament.

This week Gillard, flanked by Wayne Swan, Climate Change Minister Greg Combet, Greens leader Bob Brown and his deputy Christine Milne, unveiled the new committee whose aim is to find a consensus on how to price carbon. Gillard's success or failure as PM will hinge on this effort.

Abbott's working rule is that any Labor-Greens carbon policy will be political death. In a broader sense the Coalition believes the hung parliament will drive Gillard to the Left and this will prove fatal to her standing in the nation.

Any suggestion Gillard is surrendering to the Greens agenda on climate change, the economy, euthanasia, boatpeople or Afghanistan will be mobilised by Abbott into a grand defining narrative designed to lock in the Howard battlers and signal Labor's self-destruction.

But will Labor oblige? Or will Gillard negotiate the path that involves getting policy through the hung parliament yet saving her standing in the country?

On climate change this task falls to Combet, who becomes architect of Labor's new strategy. This week in parliament he sketched its essence. Combet's message is that Labor accepts the science; that means cutting carbon pollution is essential to a strong economy; the best way to reduce carbon is by creating a carbon price; this delivers the certainty business and investment needs.

"A carbon price is mainstream economic thinking," Combet says.

His strategy is to find a position acceptable to both Greens and business. The Greens are needed to secure the bills; business is needed to counter the Coalition. Finding any such accommodation will be difficult, as Gillard knows, yet there are encouraging omens: witness Brown and BHP Billiton chief Marius Kloppers.

Brown has reached a fateful point in his extraordinary political journey. He may hold within his hands the ability to shape Australia's carbon price future. The Greens must move a long distance and ditch much of their blind rhetoric from the past three years to meet Labor.

Is Brown pragmatic enough to compromise with Combet or will he allow the Greens to sink yet another Labor carbon price scheme?

In his comments last week Brown said the Greens accepted the task of the new committee "with great responsibility, with great seriousness". Referring to the Greens targets of 25 per cent to 40 per cent emissions reductions, compared with Labor's 5 per cent, Brown said: "All things are on the table." Maybe.

This suggests recognition of a new reality. Consider the committee: chaired by Gillard, it has Combet and Milne as co-chairs and includes independent Tony Windsor. Its aim is to reach a consensus by the end of 2011

But it is not a decision-making body. Every decision will reside solely in Gillard's cabinet. The committee will examine all carbon price options but the downplaying of targets is pivotal and points to the new strategy. This committee, unlike Rudd, will not allow formally declared targets to determine the carbon price. Because the debate about targets is self-defeating and the prospect of any global legally binding treaty is remote, the process will be reversed.

The first aim now is creation of the price mechanism and blind Freddy knows from last year the obvious start will be a fixed carbon price ($20 a tonne was nominated then, though it is far too early to talk numbers in any new scheme).

Critical to the strategy is paragraph 6.2 of the terms of reference, which seeks analysis to calculate "the carbon price equivalent of measures taken by other countries". That is, the committee will be told the Australian price equivalent, for example, of what China, the US or India has done.

What does that mean? Blind Freddy again can answer: it provides a benchmark for Australia. It will justify a certain price in Australia but no more. It won't save the world but it will be comparable with what the world is doing. It is, above all, a way to get started.

Central to this is the second committee that was announced yet got little attention: a roundtable that is strictly Labor-business, no Greens. It will involve the Treasurer, Combet and Resources Minister Martin Ferguson and business leaders. This decision recognises the significance of the Kloppers's intervention: that industry has no intention of being outmanoeuvered by the Greens, that it wants close access to senior ministers for a sustained period to examine carbon pricing, that it favours action but, like the ill-fated mining tax, it believes the key lies in the design.

The dual committees and terms of reference light the way. So does Combet's first public statement as minister that he won't be closing down the coal industry.

The message is that Labor will work with business and Greens, sometimes in the same forum and sometimes in different forums, to devise the price mechanism.

Business support is essential. It will also help Labor put Abbott under real pressure. This Labor government is guilty of many blunders but the lesson from the mining tax fiasco is the need to have the leading corporates on side. If Labor hasn't absorbed this, it doesn't deserve to survive.

Another lesson Labor has absorbed is the need for sensitivity about the on-the-ground effect of a carbon price on industry and households. The two economic advisers to the new multi-party committee are Ross Garnaut, author of the Garnaut report on climate change, and Rod Sims, who advised the Business Council of Australia on the issue.

Garnaut and Sims have a core disagreement: where Garnaut thinks Rudd offered industry too much assistance, Sims thinks such assistance was essential to get the scheme going.

Last March, Combet shared a public platform at the University of Melbourne with Garnaut and Sims. He knows their differences and he firmly favours the Sims view. By contrast, the Greens were on Garnaut's side last year and attacked the extent of assistance Rudd's scheme offered to industry.

Combet's challenge is to bring reality to the absurd expectations surrounding the climate change debate.

Any hope that Australia might cut emissions by 25 per cent to 40 per cent at 2020 is gone. That is a fantasy. It won't be achieved and can't be achieved given the global outlook.

Can the Greens adjust enough to become a serious partner for Labor? How will Milne manage the gulf between her belief and the cost of a compromise?

When asked if the Greens still stood by their 25 per cent to 40 per cent targets, Brown delivered the immoral line: "Our targets are different but our targets are the same." His point is that the Greens are not disowning their targets but they do want to work with Labor.

The political stakes are huge. If Labor can legislate a scheme with Greens votes on business support, then Abbott may be marginalised in the country by such a broad coalition in favour of a carbon price.

But if Labor fails, yet again, after another herculean political effort, there will be hell to pay and open political war between Labor and the Greens at the ballot box.